Netflix and Amazon are fierce rivals on streaming video. Netflix is
also moving its entire technology infrastructure to Amazon Web Services.
Netflix CEO Reed Hastings is Amazon's most visible infrastructure as a
service customer. On another front, Amazon is making storage cheaper for
Hastings while raising Netflix's content costs through competition
elsewhere.

Simply put, the Netflix and Amazon relationship is complicated,
nuanced and in some regards just plain weird. The Netflix-Amazon
relationship also highlights why Amazon Web Services (AWS) is
successful. At the AWS re:Invent conference this week in Las Vegas, the
Netflix-Amazon relationship was on full display.

But to hear Amazon execs and Hastings talk there's nothing out of the ordinary.

Hastings noted AWS price cuts
and thanked Andy Jassy, senior vice president of AWS on Wednesday.
Hastings also said Netflix's entire infrastructure will run on AWS.

We put just as much care into Netflix on AWS as we do Amazon retail.
We may compete on Prime instant video, but we bust our butts every day
for Netflix on AWS. The whole point of what we are doing is to
standardize that layer. Amazon retail gets the benefit of standardizing
that layer.

The importance of this Netflix relationship can't be overstated. The
Netflix case studies and ongoing collaboration allow AWS to be an option
for many of Amazon's competitors. If the Netflix and Amazon partnership
seems odd to some folks it can't be worse than Best Buy using AWS.
Retailers use AWS. E-commerce companies use AWS. A bevy of startups and
large enterprises are using AWS.

Many of these customers also compete with Amazon. In other words, AWS
rivals/customers put a lot of trust in Bezos and the gang to keep its
IT infrastructure unit separate and stay that way. That goodwill may be
AWS' secret sauce in many respects. Belief that AWS is independent can
allow it to fend off competitors who are just as surprised as Bezos at
the traction Amazon has with enterprises, government customers and
education institutions.

What remains to be seen is whether AWS is dented by encroachment from
a bevy of rivals such as Rackspace. Rackspace has made a point of
trying to poach retail customers from AWS. The Rackspace argument: Why would you give business to a rival? So far, the argument hasn't worked.

Adam Selipsky, vice president of product marketing, sales, and
product management at AWS, said rivals will give business to the company
because it meets their IT needs.
This co-opetition is "not uncommon at all," said Selipsky. Ultimately
retailers or any other customer base will stick with AWS if it delivers
strong performance, a good pace of innovation, value and good customer
support. If AWS didn't operate independently customers wouldn't use its
services, he added. "The only way to build a healthy large cash flow
generating business is to focus on servicing customers," he said. "We
and customers are comfortable with the long-term state of affairs."